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Responsible Coexistence: Challenges of Interdependence

In a globalized world, economic exchange will inevitably include politically difficult partners. Germany’s and Europe’s interdependence requires a sometimes-difficult balancing act, since industry is also invested in sustainably preserving the natural resources of our planet and strengthening the rule of law. Therefore, BDI presents the guiding principles of our interdependence.

German Industries are significantly cogged into the workings of the global economy. In 2020, Germany traded goods worth some 1.02 trillion in imports and goods worth some 1.2 trillion Euro in exports. Thereof, non-EU countries send goods in the amount of 478 billion Euro to Germany and received German goods worth some 570 billion Euro. 28 percent of German employment is directly or indirectly linked to exports. Likewise, in 2018, 29.3 percent of German GDP depended on exports. German Industries have thrived on globalization. Nevertheless, due to our exposure we have to realize that in a world no longer resting firmly on the liberal consensus, we have to face the downsides of our interdependence. “Change through trade”, it seems, has reached its limits. The expectation that global economic exchange would automatically facilitate the spread and development of market economies and democratic structures has not come to pass. So, the question for companies operating in foreign markets is how to deal with autocratic and paternalistic systems.

The Challenge: Dealing with Autocratic Regimes

China and ­Russia, among others, very much challenge our domestic values. But they also account for relevant shares of German foreign trade and are equally important destinations and sources of foreign direct investment. We must, therefore, challenge our assumption that the Western way of life represents the “end of history” (Francis Fukuyama 1989) and that democracy as the most just and efficient form of government will automatically take hold in the world. Four years of Donald Trump's administration in the United States have struck right into the heart of Western liberalism – as have electoral successes of populist politicians in many democracies around the world, including in Europe. In Russia, Vladimir Putin is willing to deploy any means to ­exploit weaknesses in the European Union and the United States while stage-managing his country as a paternalistic counterweight to an “over-liberalized” EU.

Despite globalization’s undeniable political intricacies, we insist that economic exchange gives us the means to forcefully carry our conviction and trust in liberal democracy to the world. We point out that looking inward would instead substantially weaken our Union. A policy of decoupling would mean giving up on the very promise of an open, prosperous and peaceful Europe. A frail and languid EU would be less resilient against the effects of competing politico-economic influences. Hence, we insist that it is now more important than ever for the EU to successfully position itself anew as a value-based community together with partners such as the United States, Canada, Japan, South Korea, Australia, New Zealand, the United Kingdom and others. Our continent should set a positive example. Transatlantic solidarity and increased development cooperation in Europe's neighboring regions are of fundamental importance in this context.

The Answer: Responsible Coexistence

German Industries advocate for a principled approach when dealing with autocratic states. At its core, responsible coexistence attempts to balance diverging goals. First, democracy and the rule of law are the foundations from which we will help to shape the international order. Second, economic strength as a prerequisite for social security and prosperity is essential for any functioning society. Third, responsible coexistence insists that it is a fact that companies must generate profits in order to retain long-term competitiveness.

To us, this means that external economic relations come with clear boundaries to all economic operators. Companies are neither tools of foreign policy, nor can they provide government-like structures where such are lacking. It is not in the European interest that economic operators can be active only in regions comparable to the European Union and its high standards. Companies will, however, act with reverence to the rule of law, according to global standards on workers’ safety and environmental protection and with respect and strict adherence to human rights. We welcome the transparency and accountability required regarding our business activity abroad. Standards on market financialization and an aware customer base increasingly favor sustainable business models and will make sure that our high standards and core values will remain our competitive advantage internationally.

We must accept, on the other hand, ­that different social systems ­will coexist and compete for the foreseeable future. While we unequivocally carry responsibility, companies cannot be expected to be change agents in the absence of political will and democratic accountability. Considering global ecological and economic challenges, cooperation is an imperative necessity, however. This particularly applies to areas like climate protection, the preservation of biodiversity, global protection against diseases and the digitalization of all areas of life. Retreating from foreign markets and lowering our footprint and influence in the world is, therefore, not an option.

Starting a European Debate

Large investment companies and other players are imposing ever stricter requirements for good corporate governance ­and linking investments to ever more detailed sustainability criteria. ­Companies are an important part of all societies and bear an important responsibility for their functioning. As one of the foremost umbrella organizations representing German business interests, we ­expressly acknowledge this. Despite the primacy of politics in international relations, globally active companies play an important role in shaping third country relations. Therefore, they must also take a stand on political issues. With this discussion paper, we want to advance and ­deepen the debate on these issues in Germany and the EU and ­provide guidance for companies as well as policymakers.